In such unpredictable times, it’s important to do anything we can do to stay financially stable.
When things look uncertain and finances are tight it can seem like you have a dark future ahead, but actually this is a time to build your wealth for the future. And you do this by creating really healthy habits of spending and saving now.
Jasmine Birtles is a money expert, financial and business journalist, author and presenter who aims to make the topic of money more manageable, with useful and practical advice to help people get out of debt, make more, stay debt free and invest for their future. Here’s what she said…
At MoneyMagpie, we give people the tools to plan for a rich future, starting with the foundation of wealth which is to manage your spending and making sure you get the most out of your paycheck.
Pay All Your Bills Off
The first thing you need to do when you get paid is make sure you’ve got all your necessary spending covered. Not just rent and food though. Put aside the cash for all your direct debits, bills, subscriptions and debt repayments you owe too. Set this aside in a separate account if you have to as you want to be careful you don’t burn through it accidentally!
Divide Your Money Into Pots
Everyone talks about the importance of budgeting but when you have to open up a spreadsheet every time to check, it is difficult to know where you stand financially on a day-to-day basis.
Now though, plenty of banks offer features where through your online banking you’re able to divide your money up into various pots. It’s an easy way to make sure you always have money you need reserved so you don’t accidentally spend your rent money on a meal out! Apps like Emma and Yolt also help with this so check out their free downloads.
Another way to sort your spending is to give yourself an allowance for leisure and entertainment to ensure you can still enjoy your money too.
Save Straight Away
The 50/30/20 split is a common method people use to divide up their paychecks.
In theory, 50% of your wage should be dedicated to essential needs – rent, mortgage, utilities, and groceries. With the remaining split to 30% for wants, and 20% for saving and investing. This gives you a good idea of how much money should be going where. However, a common problem is that people tend to eat into the savings chunk. Change this by setting up standing orders to ‘pay yourself first’ at the beginning of the month, or whenever you get paid. So these standing orders transfer money from your current account to savings accounts and, ideally, some long-term investments like stocks and shares ISAs. Find out how to pick the best stocks and shares ISAs here.
Make a List
It seems that we just can’t stop that urge to splurge! Research by Mortar London shows that a massive 78% of Brits succumb to impulse purchases. Marketing ploys are a big contributor to us burning through that money – it’s war on the high street and online, with retailers using all sorts of psychological nudges to get us to spend on things we don’t even want, let alone need!
Stop this unnecessary spending by always writing a shopping list before you buy anything. It massively reduces the likelihood of you making an impulse purchase, and also gives you time to think about whether you actually need everything you think you do. This goes for everything from clothes shopping to groceries. Write a list and stick to it.
Also, give yourself the chance to pause, breathe and think before whipping your credit card out. Psychologist Dr Linda Papadopulos says that giving yourself time to think can help save you money. “Ask yourself, do you really want it or need it?” she says, “can that money be better spent on something else like towards the bills, groceries or a treat at the weekend?”
Reduce the Size of Compulsory Payments
Always, always shop around for anything you buy. Whether you’re looking at renewing your insurance policy or applying for a credit card, make sure you get the best deal you can. Never automatically renew an insurance policy or other annual bill either. Either go on a comparison site to find a better deal or call up your current provider and nine times out of ten, you should be able to negotiate a better deal.
I’m a big advocate for making your money work for you, and that means investing. Unfortunately, savings accounts’ interest rates are incredibly low and are useless for growing you money (they always have been, by the way, they’re just particularly bad at the moment).
Once you have got on top of your spending habits and put some money away for a rainy day, it’s time to look at investing on a regular basis. Stock market investments are the best ones to start with, particularly index-tracking funds which are cheap and easy.
Investing can have wondrous effects on your bank balance, but it needs time to work its magic. Ideally you need to be able to leave this money untouched in investments for five years or, ideally, much more to see sufficient growth. You can start with a tenner a month if that’s all you have left but the earlier you start, the richer you will be later on. Get going with your wealth!